It is undisputed that these three companies have shown super normal comparable profits as compared to the other comparable. There exclusion from the list of comparable is quite correct. By excluding these three companies from the com parables and showing the computation on the basis of TPO data the arithmetic mean of OP/OC to 17.15% which falls within the +-5% range as permitted by section 92(C)(2). Hence, we find considerable cogency in the arguments of the ld. counsel of the assessee in this regard.
We further find that assessee has made voluminous submissions including paper books before the DRP who has passed a very cursory and laconic order without going into the details of the submissions. We find that this is quite contrary to the mandate of section 144C of the IT Act.
Adobe Systems India Pvt Ltd Vs. ACIT (ITAT Delhi)
I.T.A. No. 5043/Del/2010
A.Y. : 2006- 07
ORDER
This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals) dated 05.10.2010 and pertains to assessment year 2 006-07.
2. The effective issue raised is that Ld. Commissioner of Income Tax (Appeals) erred in passing the assessment order u/s 143(3) read with section 144C of the IT Act. It has been urged that Assessing Officer /DRP has erred in making the addition of 10,40,75,727/- to the income of the assessee on account of adjustment in the Arms Length Price of international transaction entered by the assessee with associated enterprise. It has been urged that TPO/Assessing Officer has erred by accepting companies earning super normal profits.
3. The brief facts of the case are that the assessee Adobe Systems India Private Limited (hereinafter called Adobe India or the Assessee) is a wholly and subsidiary of Adobe Systems Inc., USA. It is engaged in providing software development services and marketing support services to its associated enterprises. The TPO in this case noted that the assessee company is showing OP/Cost Margin of 14.96% which he considered to be quite low, as compared to other companies which are engaged in similar IT fields. The TPO in this case passed a Transfer Pricing order making a upward adjustment of 10,40,75,727/- on the arms length price of the international transactions. The TPO had worked out the average of arithmetic mean of ALP (OP/OC) of 42 comparables at the average of 24.91 percent. The Arm’s Length Price of international transaction was determined as under:-
